Mandelson warns over student fees

Labour's former business secretary Lord Mandelson has fired a shot across the bows of the party's leadership over university tuition fees, warning that any cut in the amount paid by graduates must be offset by increases in higher education funding from other sources.

His comments came as current Business Secretary Vince Cable dismissed proposals previously floated by Labour to cut the maximum annual fee to £6,000 as "a populist gesture which would achieve nothing and do a lot of damage".

Labour sources said they would be announcing the party's plans on fees "in the coming weeks", with some reports suggesting that they could come as early as next Friday. It remained unclear whether the party will commit to the £6,000 level, with sources stressing that this figure had been suggested by Ed Miliband in 2011 as a level the Government could move to at that point, rather than a policy for a future Labour administration.

Both Mr Miliband and shadow business secretary Chuka Umunna have since indicated that they want to move to a graduate tax in the longer term, but reports suggest wrangles at the top of the party over whether to impose a £6,000 cap in the interim.

In a speech to a private meeting of university vice-chancellors, Lord Mandelson warned that cutting back overall funding for higher education would be "a false economy", which would hold back growth and increase social inequality.

He insisted that the steep increase to £9,000 in maximum annual fees has not dented aspiration or undermined participation by young people from disadvantaged backgrounds, as critics warned when it was introduced by the coalition Government in 2012.

While stopping short of setting his face against any reduction in fee levels, Lord Mandelson said that it was vital to "sustain the flow of funding into universities from all the sources available".

He made clear he did not expect Labour to promise tax increases to fill any gap in higher education finances, telling Universities UK: "None of the parties' manifestos are going to expand state funding, that is obvious."

And he warned that universities would be forced to respond to any funding shortfall by cutting courses, facilities and support for poorer students, or by giving overseas students preference over Britons.

In what may be seen as a plea to Ed Miliband not to commit the party to radical reform ahead of the general election, the Labour peer said that finding the right funding formula for universities would require "consultation and patient deliberation".

It was Lord Mandelson, as business secretary, who commissioned the Browne Review which recommended the removal of the previous £3,000-a-year cap on tuition fees, though the review's report - and the subsequent increase in the cap to £9,000 - came after Labour had lost office.

He made clear that he does not believe the fees hike has had the damaging impact its opponents predicted.

"L evels of aspiration have not been dented by the steep increase in tuition fees since 2010," said Lord Mandelson. " Participation levels have risen from every level of British society, including the most disadvantaged. Higher fee levels have not undermined this."

He added: " These opportunities must continue to expand but we will only do so if, in this more fiscally tight environment, we sustain the flow of funding into universities from all the sources available.

"The same is true of student teaching and facilities and support for wider access. If overall financing falls, inevitably all these will be the early targets of cost savings.

"And while I strongly welcome foreign students to Britain, I would not want to see them receiving preference over British students because of the greater income they bring to universities.

"And nor would I like to see research-intensive universities cutting back or a reduction in the more costly science, technology, engineering and mathematics courses if overall funding is threatened.

"I think we have learned the lesson in Britain that cutting back higher education is a false economy and a major source of inequality in society. This should command consensus across the political spectrum."

Mr Cable told BBC Radio 4's Today programme that Labour had not been "totally clear" about their plans, adding: "As I understand it, the people advising Ed Miliband and his team are telling him that this is a foolish thing to do because it will either open a very large hole in their budget or it will be funded by quite serious cuts to universities, which is the last thing we want.

"If we don't provide the funding to universities they will simply cut back on their courses," he said. "To go to £6,000 would be a populist gesture which would achieve nothing and do a lot of damage."

The Liberal Democrat minister acknowledged his party had "a bad history" over tuition fees, after committing a U-turn on its 2010 manifesto promise to scrap them, but insisted that the new system was "fairer".

"The present system is not going to change and it is better than what we had before," said Mr Cable.

Mr Cable acknowledged that young people had been "squeezed" in recent years.

"We are in an environment where the younger generation are being squeezed not just through the education system but primarily in the housing market and in the way that jobs are no longer as secure as they were a generation ago."

Urging students to vote in the May 7 general election, he said: "If young people don't get out and have their voice heard, these problems will not be addressed."

Mr Cable wrote a letter to Mr Miliband, urging him "to reconsider and reject any moves to cut tuition fees to £6,000", and warning that a move to a graduate tax might prevent the UK from recouping funds from EU students who return home after obtaining degrees in English universities.

"If your party proceeded with a reduction in the tuition fee cap, universities would stand to lose up to £10 billion over five years, potentially resulting in staff redundancies, bigger classes and inferior teaching," warned the Business Secretary.

"That money also finances more than £700 million a year in activities to help disadvantaged students through bursaries and other access measures. If this damage is to be avoided you would need to cut other public spending or raise further taxes to cover the shortfall."

With courses in STEM (science, technology, engineering and maths) subjects costing £9,000-£12,000, a reduction in fees would require "very substantial" increases in support from other sources to maintain current provision.

Mr Cable said that a graduate tax had "a lot to commend it", and insisted that the current arrangements - under which loans are not repaid until a graduate is earning £21,000 a year or more - operate "like a graduate tax". But he added: "There is no common EU tax policy and we would therefore lack any enforcement mechanism to recoup the funding from EU students. British students would effectively subsidise EU students and this wouldn't be right."

The Business Secretary rejected Labour claims that the current system was "unsustainable" because of the high proportion of loans which are never expected to be repaid.

And he warned that Labour rhetoric about students being saddled with debt was "actively dissuading" some from attending university, though he insisted that statistics showed the fee system had not put young people off higher education.

Mr Cable said: "I really think it is time for all of us to learn from our mistakes and try to reach an understanding that rises above short-term tribal politics.

"All parties can agree that for Britain to maintain world-class universities, we need to ensure that higher education institutions are properly funded and that all qualified students can enjoy higher education with a fair repayment mechanism based on ability to pay."

Sally Hunt, general secretary of the University and College Union, said: "Labour's sideshow on the level of university fees has become something of an embarrassment for the party with even the likes of Peter Mandelson wading in to the debate.

"The time has come for the party to make clear its policy. Further delays only allow Labour to be hit with accusations of opportunism. The party should make a clear commitment to students and universities by easing the debt of students and guaranteeing vital funding for universities.

"If we are to continue to thrive as a global academic power, we need stable funding and if we are to ensure that everyone who would benefit from higher education is able to attend, we need to follow Germany's example and make tuition free.

"We can continue to featherbed big business with a corporate tax regime which is more generous than even the United States, or we can change direction and ask the most profitable companies to pay fair tax in order to fund access to university for the next generation."